Minister of Finance James Flaherty tabled his 2008 federal budget on February 26, 2008. This budget was passed in the House of Commons as many federal Liberal M.P. did not vote. The tax-related highlights are as follows:

to encourage savings, tax resident individuals over age 18 are eligible to contribute up to $5,000 per year in a new Tax Free Savings Account (TFSA) with the following rules:

unlike RRSP, contributions to this account is NOT income tax deductible

investment returns in and withdrawals from this account are tax-free

unused annual contribution limit may be carried forward indefinitely

interest paid on money borrowed is not deductible for income tax purposes

attribution rules will not apply to return earned in this account if derived from contributions by a spouse (hence an income splitting opportunity)

this account will lose its tax-exempted status upon death of the contributor, however there is provision to rollover to a spouse

once become non-tax resident, tax-exempted status of this account will continue but no new contribution is allowed

capital cost allowance (CCA) for machinery and equipment (Class 29) for 3 years: the 50% straight-line accelerated CCA treatment will apply for one additional year, and the accelerated treatment will then be provided on a declining basis over a 2-year period

improve the scientific research and experimental development tax incentive program (technical details are omitted)

extend the Mineral Exploration Tax Credit for an additional year (flow-through share agreements entered on or before March 29, 2009 are eligible)

replace the current fixed penalty of 10% of late payroll source remittance to a graduate system based on the number of days late (3% for 1to 3 days late, 5% for 4 to 5 days late, 7% for 6 to 7 days late, 10% for more than 7 days late)

due to the reduction of the general corporate income tax rate to 15% by 2012, the eligible dividend gross-up will be reduced from 45% to 44% (effective January 1, 2010), to 41% (January 1, 2011) and to 38% (January 1, 2012); the enhanced dividend tax credit rate will also change on the same schedule

There is no change in both personal and corporate income tax rate. The new TFSA will provide an income splitting opportunity and a small tax haven for investment returns. Other tax-related changes only affect a small number of taxpayers and do not warrant much coverage in this commentary.

A new Crown corporation Canada Employment Insurance Financing Board (CEIFB) will be created to manage the employment insurance (EI) account. This is to ensure that future EI premiums are used exclusively for the EI program and will not be fed into general revenues.

Despite a political storm over allegations of bribery in the Chuck Cadman affair, the minority Conservative government easily survived a key confidence vote on its federal budget on March 3, 2008. The federal Liberals did not vote against the budget to avoid a federal election as they are not organizationally or strategically ready.

Without a doubt, the Liberals will seek an election and repeat what the Conservatives did to Paul Martin’s government when they garner enough support to improve their position in the Parliament. This is a good example of how political parties place their interests and priorities over those of the people as the propriety of the budget is secondary in their consideration. In some extreme circumstances, people are justified to pursue their cause outside the established political mechanism if the politicians they elected fail to protect their fundamental rights. History around the globe has repeatedly spoken to this effect.

On March 5, 2008, Liberal Dan McTeague proposed a private member bill to allow up to $5,000 a year in RESP contributions to be tax deductible, like in RRSP. The three federal opposition parties (Liberal, NDP and Bloc Québécois) united in a surprise move to give approval in the House of Commons. The minority Conservative government opposed but failed to vote the bill down, alleging it could cost the Treasury up to $900-million a year in revenue. Don Drummond, chief economist at the TD Canada Trust, revised this estimate to a $2-billion loss in revenue a year (National Post, March 8, 2008). At the point of writing, the Liberal-dominated Senate will have the final say and this proposal is not law yet.

The opposition parties hit a political jackpot by supporting a voter-pleasing tax break that could drain the government’s revenue and then blame the Conservative government for failing to honor commitments and/or failing to balance the budget. The fact that this bill was proposed as a private Liberal member bill will give the Liberals an opportunity to defeat or to pass it in Senate, hence giving the party bargaining power to negotiate with the Conservatives on other issues. In politics (totalitarian and democratic alike), struggle for power always exists at the expense of people as their best interests are not always placed at top priority.

Some MP had already stepped up their pre-election campaign effort in early 2008. They are expecting that a federal election is imminent. Unless popular support changes in their favor, the federal Liberals will avoid an election as they will have nothing to gain and have to bear the risk of being blamed for causing an expensive election. The Cadman bribery allegation is a mudslinging effort trying to destroy the Conservatives. It would be interesting to see how the RCMP investigation of the bribery allegations and Stephen Harper’s defamation lawsuit transpire as this political soap opera continues.

Independent MP Chuck Cadman, who cast the deciding vote that let Paul Martin's minority Liberal government survive a confidence motion in May 2005 died of skin cancer in July 2005. There is an allegation that the Conservatives had tried to bribe the late MP by offering a life insurance policy should he cast his vote against the Martin’s government. Monetary offer to a Canadian MP for the purpose of influencing his political decisions is a crime in Canada.

Mr. Cadman became politically active after his 16-year-old son Jesse was killed in a random street attack on October 18, 1992. He was first elected to Parliament for Surrey North in the 1997 election as a member of the Reform Party of Canada. He introduced a private members bill which proposed to raise the maximum jail term for parents whose children commit crimes while under their supervision. This bill would later be incorporated into Canada's Youth Criminal Justice Act in November 2000. He was re-elected in 2000 under the Canadian Alliance banner.

Prior to the 2004 election, he lost the nomination for the Conservative Party to Jasbir Singh Cheema. Cadman ran as an independent candidate in that election and was elected.

Typical to a former band guitarist, he was known for wearing a ponytail and blue jeans in Parliament.